If your business has employees, at least one of them will someday leave. When employees exit, they may head straight for a competitor, where you’ll worry that they’ll use the information that they gained while working for you to benefit that business. That could even extend to reaching out to your own clients and luring them over, at which point you’ll start to lose money.
To protect against that, many businesses have employees and contractors sign something called a non-solicitation agreement. This legal document states that they will not “solicit” your customers, affiliates, or business partners for a very specific time period following termination. But before you have your workers sign one, it’s important to make sure it’s legal.
How Non-Solicitation Agreements Are Presented
Although non-solicitation agreements can be separate documents, often they exist as a clause inside an employment agreement. Non-solicitation agreements may be bundled with, or exist alongside, non-disclosure agreements and non-compete agreements. Non-disclosure agreements require employees to keep all information confidential during and following employment. Non-compete agreements, on the other hand, limit the employee’s ability to work for competitors or start a competing business.
You can find online templates that outline all the information that needs to be included. Make sure you provide a very specific time period following termination, as well as defining whether you want to include vendors, clients, customers, partners, other employees, and/or business partners in the scope of people your workers can’t solicit.
How to Make Your Agreement Enforceable
Before you invest time into developing paperwork, check the legality of non-solicitation agreements in your state. California in particular makes enforcement tough, as the state tends to rule against anything seen as restricting fair trade. Outside of California, you’ll likely have better luck, but monitor local laws to ensure this doesn’t change.
Even if a non-solicitation requirement is enforced in your state, though, you’ll need to make sure your terms are reasonable. If there is a violation, you’ll have to demonstrate to the court that it hurt your business, so state in the agreement how protecting your customer list is essential to your business’s success. You’ll also need to attach a reasonable timeline to the agreement. Prohibiting an employee from soliciting clients for 18 months after termination is more reasonable than attaching a ten-year timeframe to it.
As employees come and go from your business, you’ll want to preserve your relationships with your clients, vendors, and business partners. Try to always part with employees on good terms and hopefully you’ll find your reputation keeps those partnerships in place no matter what happens.